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Autumn Statement: the pensions points you need to know

In what turned out to be the last ever Autumn Statement, there were no big shocks or rabbits pulled from the hat. Instead, Philip Hammond’s first star turn as Chancellor turned out to be a ‘quiet affair’ for pensions and savings in general, albeit with a couple of key changes to be aware of.

The first one – pension scams – had been announced the weekend before, but when the big day arrived we didn’t get any more information. Instead, the Treasury will shortly launch a consultation on options to tackle pension scams – including banning cold calling in relation to pensions, giving schemes greater powers to block suspicious transfers and making it harder for scammers to abuse SSASs (small self-administered schemes).

It’s good news the government has taken the first steps in tackling pension cold calling. Although this consultation won’t be a panacea to all the pension scam problems – for example, it won’t cover overseas calls - we need to start somewhere. Ideally, the consultation will cover texts and emails as well as calls, otherwise it will only tackle a proportion of the ways people can get contacted.

But the government needs to be careful in banning all unsolicited calls. There are many reasons scheme administrators might need to get in touch with members and other people, and the new rules should not stop them from doing their job.

Perhaps the biggest surprise of the day was the proposed reduction in the Money Purchase Annual Allowance (MPAA) from £10,000 to £4,000, from April 2017. The government is clearly worried too many people are recycling the pension income they can take under pension freedoms from age 55 to take advantage of tax relief.

The MPAA is triggered whenever someone ‘flexibly accesses’ their pension benefits – for example taking pension income from flexi-access drawdown (Fad) or taking out short-term annuity. It cuts the usual annual allowance of £40,000 and limits the amount of money people can carry on saving into a money purchase arrangement to £10,000.

I think this decision to slash the MPAA by more than half to £4,000 is disappointing. The Treasury has set a lot of store in the message that pension freedoms help people phase into retirement by combining taking a retirement income with working. But to have this true flexibility people need to be able to build up their pension savings, even if it’s in the twilight years of their working life. This reduction in the MPAA just sends out the wrong message and will make it harder for those who want to merge working later in life with continued pension saving for their future.

The Chancellor also announced the government’s decision, following a consultation earlier this year, to remove, from April 2017 the tax and employer national insurance advantages of salary sacrifice schemes. This will mean employees swapping salary for benefits will pay the same tax as other individuals who buy them out of their post-tax income.

Importantly, this excludes employer pension contributions and employer-funded pensions advice (as well as childcare, Cycle to Work schemes and ultralow emission cars). And although we can breathe a sigh of relief that pensions have once again ‘dodged this bullet’, it does set a worrying precedent, and raises the spectre pensions will be caught by future reviews. This concern may put off some employers setting up salary sacrifice arrangements for their pension schemes.

Finally, the triple lock for the state pension got a mention. Although many had been predicting it may get changed, Hammond confirmed it would remain in place until 2020, and instead will be reviewed by the next parliament.

So, although it was quiet Autumn Statement for pensions I wonder if this will be enough to put all the rumours on changes to pensions tax relief to bed for a while. Somehow, I doubt it.